(REIT) Interim Financial Report for the Fiscal Period Ending August 2019
REIT Securities Issuer:
TSE Code:
Representative:

SANKEI REAL ESTATE Inc.
2972
Yuichi Ota, Executive Director

Listing:
URL:

Asset Management Company:
Representative:
Contact:

Sankei Building Asset Management Co., Ltd.
Yuichi Ota, President and Chief Executive Officer
Atsushi Mukai, Director and Chief Financial & IR Officer
TEL: +81-3-5542-1316

June 14, 2019
Tokyo Stock Exchange
https://www.s-reit.co.jp/

Scheduled date of submission of semiannual securities report:

July 31, 2019

Preparation of supplementary interim financial results briefing materials:
Holding of interim financial results briefing session:

Yes
Yes (for institutional investors and analysts)(Amounts are rounded down to the nearest million yen)
1. Status of Management and Assets for the Fiscal Period Ending August 2019’s Interim Period (from November 19, 2018 to April 30, 2019)(1) Results of Operations(% figures are the rate of period-on-period increase (decrease))
Operating revenue

Operating profit

Ordinary profit

Profitmillion yen%

million yen%

million yen%

million yen

%

328

-

192

-

(80)

-

(81)

-

Interim period
ended Apr. 2019

Earnings
per unityenInterim period
ended Apr. 2019

(1,104)(Note 1) At SANKEI REAL ESTATE Inc. (hereinafter, “SANKEI REAL ESTATE”), the accounting period of the fiscal period ending August 2019’s interim period is aperiod of 163 days from November 19, 2018 to April 30, 2019, but the number of days of the actual asset management period is a period of 50 days
from March 12, 2019.
(Note 2) Earnings per unit is calculated by dividing profit by the daily weighted average number of investment units (73,562 units).
(Note 3) Percentage figures for operating revenue, operating profit, ordinary profit and profit are the rate of period-on-period increase (decrease), but are notapplicable for the interim period under review, because it is the 1st interim period.
(Note 4) The ordinary loss of 80 million yen and net loss of 81 million yen were attributable to expenses associated with issuance of new investment units andlisting of investment units, etc. totaling 253 million yen being expensed in lump sum in the interim accounting period under review.

(2) Financial Position

Interim period
ended Apr. 2019

Total assets
million yen

Net assets
million yen

47,66523,043

Cash flows fromoperating activities
million yen

Cash flows frominvesting activities
million yen(510)(42,068)

Equity ratio%

Net assets per unit
yen

48.3

96,175(3) Cash Flows

Interim period
ended Apr. 2019

Cash flows from
Cash and cash equivalents
financing activities
at end of period
million yen
million yen
45,3712,792

2. Operating Forecasts for the Fiscal Period Ending August 2019 (from November 19, 2018 to August 31, 2019) andOperating Forecasts for the Fiscal Period Ending February 2020 (from September 1, 2019 to February 29, 2020)(% figures are the rate of period-on-period increase (decrease))

Operatingrevenuemn yenFiscal period
ending Aug. 2019
Fiscal period
ending Feb. 2020

OperatingprofitDistribution
per unit

Ordinary
profit(excluding
distribution
in excess ofearnings)

ProfitDistribution
in excess ofearnings
per unit% mn yen% mn yen% mn yen

%

yen

yen

1,140

-

632

-

264

-

263

-

1,099

-

1,222

7.2

634

0.3

579

119.3

578

119.8

2,414

-

(Reference) Forecast earnings per unit (Forecast profit ÷ Forecast total number of investment units issued and outstanding at end of period)
Fiscal period ending August 2019: 1,099 yen
Fiscal period ending February 2020: 2,414 yen(Note 1) Distribution per unit (excluding distribution in excess of earnings) is calculated based on the forecast total number of investment units issued andoutstanding at the end of the fiscal period ending August 2019 of 239,600 units.
(Note 2) Percentage figures for operating revenue, operating profit, ordinary profit and profit are the rate of period-on-period increase (decrease), but are notapplicable for the fiscal period ending August 2019, because it is the 1st fiscal period.

* Other(1) Changes in accounting policies, changes in accounting estimates, and retrospective restatements
i. Changes in accounting policies accompanying amendments to accounting standards, etc.: None
ii. Changes in accounting policies other than i.:Noneiii. Changes in accounting estimates:
None
iv. Retrospective restatements:
None(2) Total number of investment units issued and outstandingi. Total number of investment units issued and outstanding (including treasury investment units) at end of period
Interim period ended Apr. 2019239,600 unitsii.

Number of treasury investment units at end of period
Interim period ended Apr. 2019
0 units(Note)For the number of investment units serving as the basis for calculation of earnings per unit, please refer to “Notes on Per Unit Information” on page 15.

* Presentation of Status of Implementation of Interim Audit Procedures
At the time of disclosure of this interim financial report, the audit procedures for interim financial statements pursuant to the
Financial Instruments and Exchange Act have not been completed.
* Explanation of Appropriate Use of Operating Forecasts, and Other Matters of Special Note
The operating forecasts and other forward-looking statements contained in this document are based on information currently
available to and certain assumptions deemed reasonable by SANKEI REAL ESTATE. Accordingly, the actual results of operations, etc.
may differ materially due to various factors. In addition, the forecasts are not a guarantee of the amount of distribution. For theassumptions underlying the operating forecasts, matters of note in the use of the operating forecasts, etc., please refer to“Assumptions Underlying the Operating Forecasts for the Fiscal Period Ending August 2019 (from November 19, 2018 to August 31,2019) and Fiscal Period Ending February 2020 (from September 1, 2019 to February 29, 2020)” on page 4.
The business period of the 1st fiscal period of SANKEI REAL ESTATE is from November 19, 2018 to August 31, 2019. An interim
settlement of accounts has been conducted, because the concerned business period exceeds nine months. Please note that
subsequent fiscal periods of SANKEI REAL ESTATE end on the last day of February and the last day of August.

SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019
Table of Contents
1. Related Parties of the Investment Corporation

2

2. Management Policy and Management Status

2(1) Management Policy

2(2) Management Status

2(3) Investment Risks

5

3. Interim Financial Statements

6(1) Interim Balance Sheet

6(2) Interim Statement of Income

8(3) Interim Statement of Unitholders’ Equity

9(4) Interim Statement of Cash Flows

10(5) Notes on the Going Concern Assumption

11(6) Notes on Matters Concerning Significant Accounting Policies

11(7) Notes to the Interim Financial Statements

12(8) Changes in Total Number of Investment Units Issued and Outstanding

16

4. Changes in Directors

17(1) Directors of the Investment Corporation

17(2) Directors of the Asset Management Company

17

5. Reference Information

18(1) Investment Status

18(2) Investment Assets

19

-

1

-

SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019

1. Related Parties of the Investment Corporation
Disclosure is omitted, because there is no significant change from “Structure of the Investment Corporation” in the securities
registration statement (submitted on February 7, 2019, as amended).

2. Management Policy and Management Status(1) Management Policy
Disclosure is omitted, because there is no significant change from “Investment Policy,” “Investment Targets” and “Distribution
Policy” in the securities registration statement (submitted on February 7, 2019, as amended).
(2) Management Status(Overview of the Interim Period under Review)i. Brief History of the Investment Corporation
SANKEI REAL ESTATE was incorporated under the Act on Investment Trusts and Investment Corporations (Act No. 198 of1951, as amended; hereinafter, the “Investment Trusts Act”) with Sankei Building Asset Management Co., Ltd.
(hereinafter, the “Asset Management Company”) as the organizer and investments in capital of 100 million yen (1,000
units) on November 19, 2018, and completed the registration with the Kanto Local Finance Bureau pursuant to Article
187 of the Investment Trusts Act on December 17, 2018 (Registration No. 140 with the Director-General of the Kanto
Local Finance Bureau). Later, SANKEI REAL ESTATE implemented an issuance of new investment units through public
offering (227,238 units) with March 11, 2019 as the payment due date, and listed on the Real Estate Investment Trust
Securities Market of Tokyo Stock Exchange, Inc. (hereinafter, “Tokyo Stock Exchange”) on March 12, 2019 (TSE code:2972). In addition, the abovementioned capital increase through public offering was accompanied by an issuance of new
investment units through third-party allotment (11,362 units) with April 10, 2019 as the payment due date. As a result,as of the last day of the interim period under review (April 30, 2019), total number of investment units issued andoutstanding was 239,600 units.
SANKEI REAL ESTATE aims to maximize unitholder value over the medium to long term by growing with the J-REIT market
as a public entity of society that makes each and every person happy, under the philosophy of “Making people, cities &society happy,” through sponsorship support from the Sankei Building Group (Note), which undertakes the “Urban
Development, Hotels & Resorts” operations of media conglomerate Fuji Media Holdings, Inc.
(Note)

ii.

“Sankei Building Group” refers to the corporate group comprising The Sankei Building Co., Ltd. (the sponsor) and its 13 consolidated
subsidiaries (as of the last day of March 2019). The same shall apply hereinafter.

Management Environment
In the interim period under review (interim period ended April 2019), the Japanese economy showed signs ofcautiousness in corporate business sentiment, but steady improvement in the employment situation, pick-up in private
consumption and other factors led to a strong showing. On the other hand, the environment is one that calls forattention to be given to the uncertainties over overseas economic trends and policies, such as trade issues between the
U.S. and China and Brexit issues, and the effects of financial and capital market fluctuations.
Under such economic circumstances, in terms of office buildings, which SANKEI REAL ESTATE sets as the primary
investment target, corporate relocations, office environment improvements and other resilient demand led to vacancy
rate hovering at a low level and rent continuing to be on the rise. Meanwhile, in terms of hotels, which SANKEI REALESTATE sets as an investment target as sub assets, demand for hotel guest rooms was strong as the number ofinternational visitors to Japan continued to increase (according to the Japan Tourism Agency).

iii.

Management Status
SANKEI REAL ESTATE commenced management with the acquisition of the 8 properties in the portfolio as of the last dayof the interim period under review for a total of 43,395 million yen on March 12, 2019. Accordingly, the interim period
under review’s actual asset management period was a period of 50 days from March 12, 2019 to April 30, 2019.
Furthermore, as of the last day of the interim period under review, the 8 properties in the portfolio had total leasablearea of 33,097.44 m2, total leased area of 33,091.43 m2 and occupancy rate of 100.0% (Note).
(Note)“Occupancy rate” is the ratio of total leased area to total leasable area, rounded to one decimal place. Furthermore, for total leasablearea and total leased area, each total is calculated based on the area corresponding to SANKEI REAL ESTATE’s ownership interest ineach portfolio property.

-

2

-

SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019
iv.

Financing Status(Equity Financing)In the interim period under review, with the new listing on Tokyo Stock Exchange, an issuance of new investment units
through public offering (227,238 units) with March 11, 2019 as the payment due date was implemented, procuring
21,928 million yen in funds. In addition, the abovementioned capital increase through public offering was accompanied
by an issuance of new investment units through third-party allotment (11,362 units) with April 10, 2019 as the payment
due date, procuring 1,096 million yen in funds. As a result, as of the last day of the interim period under review,
unitholders’ capital was 23,124 million yen.
(Debt Financing)In the interim period under review, 23,410 million yen was borrowed from Mizuho Bank, Ltd., Sumitomo Mitsui Banking
Corporation, Development Bank of Japan Inc., Mizuho Trust & Banking Co., Ltd., Sumitomo Mitsui Trust Bank, Limited,
Shinsei Bank, Limited and Resona Bank, Limited. through a loan syndicate with Mizuho Bank, Ltd. and Sumitomo Mitsui
Banking Corporation as the arrangers on March 12, 2019 in conjunction with the acquisition of properties. In addition,
early repayment of 1,096 million yen was made on April 22, 2019 using the proceeds from the issuance of new
investment units through third-party allotment as the funds for the repayment. As a result, as of the last day of theinterim period under review, the balance of borrowings outstanding was 22,313 million yen and the ratio of borrowings
to total assets (hereinafter, “LTV ratio”) was 46.8%.
v.

Overview of Business Performance
Business performance in the interim period under review was operating revenue of 328 million yen, operating profit of
192 million yen, ordinary loss of 80 million yen and loss of 81 million yen. Please note that expenses associated withissuance of new investment units and listing of investment units, etc. totaling 253 million yen were expensed in lumpsum.

(Future Outlook)i.

General Management Outlook(A) External Growth Strategy
As a rule, SANKEI REAL ESTATE aims to steadily expand the scale of its assets by positioning The Sankei Building Co.,
Ltd.’s office building portfolio at the core of its pipeline for future external growth.
SANKEI REAL ESTATE aims for sustainable growth and maximization of unitholder value by expanding the scale of assets
under management while maintaining and improving earnings of assets under management over the medium to longterm by putting into practice a growth strategy that utilizes an “asset recycling business model,” (Note) whereby SANKEIREAL ESTATE and the Sankei Building Group contribute to each other’s growth, and a platform made up of each of thecompanies of the Sankei Building Group, which has an extensive track record in real estate development, operation andmanagement functions.
(Note)“Asset recycling business model” refers to the business model of SANKEI REAL ESTATE and the Sankei Building Group contributing toeach other’s growth by generating a circulation of assets in that, on the one hand, SANKEI REAL ESTATE expands asset size by acquiringand owning real estate invested or developed by the Sankei Building Group while, on the other hand, the Sankei Building Group applies
the proceeds from the sale of assets to lead to creation of new real estate investment or development and the real estate so invested
or developed becomes another investment target (potential property) of SANKEI REAL ESTATE.

(B) Internal Growth Strategy
As a rule, SANKEI REAL ESTATE aims for steady internal growth through The Sankei Building Co., Ltd.’s sponsorshipsupport.
The Sankei Building Group boasts not only the functions of planning and development of properties of a wide range ofasset types capturing its own and various real estate investor needs, and the functions to attract tenants and customers
by utilizing its vast and strong network, but also a diverse array of operation and management functions, such as
property management, building management, construction management and building maintenance for real estate
under its management.
SANKEI REAL ESTATE will utilize the Sankei Building Group’s comprehensive operation and management functions
ranging from real estate planning and development to lease-up, operation and management through collaboration
within the Sankei Building Group with The Sankei Building Co., Ltd. at the core.
(C) Financial Strategy
SANKEI REAL ESTATE will conduct appropriate and sound financial management while considering for agility of financing
activities, stability of cash flows and other matters in order to secure stable earnings and steady growth of assets undermanagement over the medium to long term.
-

3-

SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019
ii.

Significant Subsequent Events
Not applicable.

iii.

Operating Forecasts
SANKEI REAL ESTATE’s operating forecasts for the fiscal period ending August 2019 (from November 19, 2018 to August
31, 2019) and fiscal period ending February 2020 (from September 1, 2019 to February 29, 2020) are as follows:

Operatingrevenue

Fiscal period
ending Aug. 2019
Fiscal period
ending Feb. 2020

OperatingprofitDistribution
per unit

Ordinary
profitProfit(excluding
distribution
in excess ofearnings)

Distribution
in excess ofearnings
per unit

million yen

million yen

million yen

million yen

yen

yen

1,140

632

264

263

1,099

-

1,222

634

579

578

2,414

-

Furthermore, for the assumptions underlying the operating forecasts, please refer to “Assumptions Underlying the
Operating Forecasts for the Fiscal Period Ending August 2019 (from November 19, 2018 to August 31, 2019) and Fiscal
Period Ending February 2020 (from September 1, 2019 to February 29, 2020)” presented below.
(Note)

The forecast figures above are the current forecasts calculated under certain assumptions. Accordingly, the actual operating revenue,
operating profit, ordinary profit, profit, distribution per unit and distribution in excess of earnings per unit may vary due to changes in
the circumstances. In addition, the forecasts are not a guarantee of the amount of distribution.

Assumptions Underlying the Operating Forecasts for the Fiscal Period Ending August 2019 (from November 19, 2018 to August 31,2019) and Fiscal Period Ending February 2020 (from September 1, 2019 to February 29, 2020)
Item

Assumptions
・Fiscal period ending August 2019 (1st fiscal period) (from November 19, 2018 to August 31, 2019) (286 days)

Accounting
period・Fiscal period ending February 2020 (2nd fiscal period) (from September 1, 2019 to February 29, 2020) (182 days)
・Note that the actual business period of the 1st fiscal period is from March 12, 2019, the date of acquisitionof properties, to the last day of August 2019 (173 days).
・The assumption is the real estate and real estate trust beneficiary rights (total of 8 properties) held as ofAssets undermanagement

April 30, 2019 (hereinafter, the “current portfolio assets”), and that these will continue to be held and there
will be no acquisition of new properties through to the end of the fiscal period ending February 2020.
・In actual practice, change may arise due to acquisition of new properties, disposition of portfolio properties,
etc.
・Leasing business revenue of the current portfolio assets is calculated by taking into account various factors,

Operatingrevenuesuch as lease agreements that have been concluded, tenant trends and market trends.
・Note that the calculations take into account increase in leasing business revenue due to the expiration of therent-free period for some tenants, among other factors.
・The assumption is that there will be no delinquent or unpaid rent by tenants.
・Of operating expenses, the main components are as follows:

Operatingexpenses

Expenses related to leasing business [Total]
Management fee
Utilities expenses
Repair expenses
Property taxes
Depreciation
Other than expenses related to leasing business [Total]
Asset management fee

Fiscal period
ending Aug. 2019
339
96
57
41
0
106
167
103

(Unit: million yen)
Fiscal period
ending Feb. 2020
409
101
60
41
49
115
178
115

・Of expenses related to leasing business, which are the main operating expenses, the expenses other thandepreciation are calculated on the basis of historical data and by taking into consideration the factors
causing fluctuation in each of the expenses.
・Depreciation is calculated using the straight-line method.
-

4-

SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019
Item

Assumptions
・In general, fixed asset tax, city planning tax, etc. are calculated on a pro rata basis and reimbursed at thetime of property acquisition with the current owner upon transactions of real estate, etc. At SANKEI REALESTATE, the amount equivalent to the reimbursement is included in the cost of acquisition and thus not
expensed in the business period in which the property acquisition date falls in the case of the properties forOperatingexpenses

which such reimbursement is made at the time of transaction. Furthermore, fixed asset tax, city planningtax, etc. for the 8 properties acquired in March 2019 are expected to be expensed starting from the fiscal(cont.)

period ending February 2020 and that amount is assumed to be 49 million yen.
・Repair expenses for buildings is the amount estimated based on medium- to long-term repair plans
formulated by the asset management company. However, repair expenses possibly increasing in amount or
additionally arising from unforeseeable factors may result in repair expenses differing materially from theforecast amount.
・As temporary expenses, 58 million yen of organization expenses and 67 million yen of expenses related to

Non-operating
expenses

the issuance of new investment units, listing of investment units and public offering is assumed for the fiscal
period ending August 2019.
・As interest expenses and other borrowing-related expenses, 192 million yen is assumed for the fiscal period
ending August 2019 and 55 million yen for the fiscal period ending February 2020.
・The assumption is that total interest-bearing liabilities will be 22,313 million yen at the end of the fiscal
period ending August 2019 and 21,700 million yen at the end of the fiscal period ending February 2020.
・The assumption is that, with refund of consumption taxes corresponding to the fiscal period ending AugustInterest-bearing
liabilities

2019 scheduled to take place during the fiscal period ending February 2020, the concerned refund, etc. will
be used as the source of funds to repay a portion (613 million yen) of borrowings during the fiscal period
ending February 2020, and there will be no change in the balance of borrowings other than the above
through to the end of the fiscal period ending February 2020.
・LTV ratio is expected to be 46.8% at the end of the fiscal period ending August 2019 and 45.7% at the end of
the fiscal period ending February 2020. LTV ratio is calculated by the following formula and rounded to one
decimal place.
LTV ratio = Total interest-bearing liabilities ÷ Total assets × 100
・The assumption is the number of investment units issued and outstanding as of the date of this document of

Investment units

239,600 units and that there will be no change in the number of investment units due to issuance of new
investment units, etc. through to the end of the fiscal period ending February 2020.
・Distribution per unit (excluding distribution in excess of earnings) is calculated based on the forecast
number of investment units issued and outstanding at the end of the fiscal period ending August 2019 andfiscal period ending February 2020 of 239,600 units.

Distribution
per unit(excluding
distribution
in excess ofearnings)
Distribution
in excess ofearnings
per unit

・Distribution per unit (excluding distribution in excess of earnings) is calculated based on the assumption that
distribution of earnings will be in accordance with the policy on distribution of cash provided in SANKEI REALESTATE’s articles of incorporation.
・Distribution per unit (excluding distribution in excess of earnings) may vary due to various factors, such as
fluctuation in leasing business revenue accompanying change in assets under management, change intenants or other event, or incurrence of unexpected repairs.
・No cash distribution in excess of earnings is planned to be made at this point in time.
・The assumption is that there will be no amendment of laws and regulations, tax systems, accounting
standards, listing regulations provided by Tokyo Stock Exchange, Inc., rules provided by The Investment

Other

Trusts Association, Japan, etc. that will impact the forecast figures above.
・The assumption is that there will be no unforeseen material change in general economic trends, real estatemarket conditions, etc.

(3) Investment Risks
Disclosure is omitted, because there is no significant change from “Investment Risks” in the securities registration statement(submitted on February 7, 2019, as amended).
-

5-

SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019

3. Interim Financial Statements(1) Interim Balance Sheet(Unit: thousand yen)
1st interim period(as of Apr. 30, 2019)
AssetsCurrent assets
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Prepaid expenses
Consumption taxes receivable
Other
Total current assets
Non-current assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net
Structures
Accumulated depreciation
Structures, net
Land
Buildings in trust
Accumulated depreciation
Buildings in trust, net
Structures in trust
Accumulated depreciation
Structures in trust, net
Land in trust
Total property, plant and equipment
Intangible assets
SoftwareTotal intangible assets
Investments and other assets
Long-term prepaid expenses
Leasehold and guarantee deposits
Total investments and other assets
Total non-current assets
Total assets

1,856,163
935,874
83,89839,176
667,420996
3,583,530

143,744(864)
142,879345(1)
344
2,429,523
7,619,417(39,727)
7,579,690
15,369(70)
15,29933,849,883
44,017,620
6,476
6,476
47,43910,00057,43944,081,536
47,665,067

-

6

-

SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019
(Unit: thousand yen)
1st interim period(as of Apr. 30, 2019)
Liabilities
Current liabilities
Operating accounts payable
Short-term borrowings
Accounts payable - other
Income taxes payable
Advances received
Other
Total current liabilities
Non-current liabilities
Long-term borrowings
Leasehold and guarantee deposits received
Leasehold and guarantee deposits received in trust
Total non-current liabilities
Total liabilities
Net assets
Unitholders’ equity
Unitholders’ capital
Surplus
Unappropriated retained earnings (undisposed loss)
Total surplus
Total unitholders’ equity
Total net assets
Total liabilities and net assets-

746,826
4,913,736
114,369504
128,106
11,456
5,214,998
17,400,000
88,992
1,917,422
19,406,415
24,621,413

23,124,900*1-(81,245)(81,245)
23,043,654
23,043,654
47,665,067

SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019(2) Interim Statement of Income(Unit: thousand yen)
1st interim period
From: Nov. 19, 2018To:
Apr. 30, 2019
Operating revenue
Leasing business revenue
Other leasing business revenue
Total operating revenue
Operating expenses
Expenses related to leasing business
Asset management fee
Asset custody fee
Administrative service fees
Remuneration for directors (and other officers)
Other operating expenses
Total operating expenses
Operating profit
Non-operating income
Interest income
Total non-operating income
Non-operating expenses
Interest expenses
Borrowing related expenses
Investment unit issuance expenses
Organization expenses
Other
Total non-operating expenses
Ordinary profit (loss)
Profit (loss) before income taxes
Income taxes - current
Total income taxes
Profit (loss)
Unappropriated retained earnings (undisposed loss)*1*1

306,041
22,422
328,464*1

90,24730,334
2,077
4,183
3,600
5,095
135,538
192,92600
10,578135,538
67,39358,1572,000
273,667(80,741)(80,741)504
504(81,245)(81,245)-8-SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019(3) Interim Statement of Unitholders’ Equity
1st interim period (from November 19, 2018 to April 30, 2019)(Unit: thousand yen)
Unitholders’ equity
Surplus

Balance at beginning of period

Unitholders’capitalUnappropriatedretained earnings(undisposed loss)

-

-

Total
net assets

Total
unitholders’equityTotal
surplus---23,124,900

23,124,900

Changes in items during period
Issuance of new investment units

23,124,900

Profit (loss)
Total changes in items during period
Balance at end of period*1(81,245)(81,245)(81,245)(81,245)

23,124,900(81,245)(81,245)

23,043,654

23,043,654

23,124,900(81,245)(81,245)

23,043,654

23,043,654

-

9

-

SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019(4) Interim Statement of Cash Flows(Unit: thousand yen)
1st interim period
From: Nov. 19, 2018To:
Apr. 30, 2019
Cash flows from operating activities
Profit (loss) before income taxes
Depreciation(80,741)
40,664

Investment unit issuance expenses
Interest income

67,393(0)Interest expenses
Decrease (increase) in operating accounts receivable

10,578(83,898)

Decrease (increase) in consumption taxes refund receivable
Decrease (increase) in prepaid expenses(667,420)(39,176)

Increase (decrease) in operating accounts payable
Increase (decrease) in accounts payable - other

46,826
114,369

Increase (decrease) in advances received
Decrease (increase) in long-term prepaid expenses

128,106(47,439)

Decrease (increase) in other assets
Increase (decrease) in other liabilities

(996)
1,295

Subtotal(510,440)

Interest received
Interest paid

0
(417)

Income taxes paid(0)

Net cash provided by (used in) operating activities(510,857)

Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of property, plant and equipment in trust(2,573,613)(41,484,671)

Proceeds from leasehold and guarantee deposits received
Proceeds from leasehold and guarantee deposits received in trust

88,992
1,917,422

Payments of leasehold and guarantee deposits
Other, net(10,000)(6,476)

Net cash provided by (used in) investing activities(42,068,346)

Cash flows from financing activities
Proceeds from short-term borrowings
Repayments of short-term borrowings

6,010,169(1,096,433)

Proceeds from long-term borrowings
Proceeds from issuance of investment units

17,400,000
23,057,506

Net cash provided by (used in) financing activities

45,371,242

Net increase (decrease) in cash and cash equivalents

2,792,038

Cash and cash equivalents at beginning of period*1Cash and cash equivalents at end of period

-

10

-

2,792,038

SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019(5) Notes on the Going Concern Assumption
Not applicable.
(6) Notes on Matters Concerning Significant Accounting Policies
1.

Method of depreciation of
non-current assets(1) Property, plant and equipment (including trust assets)
The straight-line method is adopted. Furthermore, the useful life of coreproperty, plant and equipment is as follows:
Buildings
Structures

2–65 years
6–59 years(2) Intangible assets
The straight-line method is adopted.
(3) Long-term prepaid expenses
The straight-line method is adopted.
2.

Accounting for deferred assets(1) Organization expenses
The entire amount is expensed as incurred.
(2) Investment unit issuance expenses
The entire amount is expensed as incurred.

3.

Standards forrevenue and expense recognition

Accounting for fixed asset tax, etc.
For fixed asset tax, city planning tax, depreciable asset tax, etc. on real estateor trust beneficiary rights that have real estate as trust assets held, themethod adopted is that, of the tax amount assessed and determined, theamount corresponding to the concerned accounting period is expensed as
expenses related to leasing business.
Furthermore, the amount equivalent to fixed asset tax, etc. in the initial fiscal
year borne by SANKEI REAL ESTATE upon acquisition of real estate or trust
beneficiary rights that have real estate as trust assets is not recognized as
expenses but included in the cost of acquisition of the concerned real estate,etc. The amount equivalent to fixed asset tax, etc. included in the cost of
acquisition for the interim period under review will not arise, as thesettlement of acquisition of real estate or trust beneficiary rights that havereal estate as trust assets is not completed.

4.

Scope of funds in the interim

The funds (cash and cash equivalents) in the interim statement of cash flows

statement of cash flows

comprise cash on hand and cash in trust, demand deposits and deposits in trust,and short-term investments with a maturity of 3 months or less from the date ofacquisition that are readily convertible to cash and that are subject to an
insignificant risk of changes in value.

5.

Other significant matters serving(1) Accounting for trust beneficiary rights that have real estate, etc. as trust assets

as the basis for preparation of
the interim financial statements

Concerning trust beneficiary rights that have real estate, etc. as trust assets
held, all accounts of assets and liabilities within trust assets and all accounts ofrevenue and expenses from the trust assets are recognized in the relevant
account item of the interim balance sheet and the interim statement ofincome.
Furthermore, the following material items of the trust assets recognized in therelevant account item are separately listed on the interim balance sheet.
i. Cash and deposits in trust
ii.
iii.

Buildings in trust; Structures in trust; Land in trust
Leasehold and guarantee deposits received in trust(2) Accounting for consumption tax, etc.
The accounting for consumption tax and local consumption tax is by themethod of exclusion of the taxes.

-

11

-

SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019(7) Notes to the Interim Financial Statements[Notes to the Interim Balance Sheet]*1. Minimum net assets as provided in Article 67, Paragraph 4 of the Act on Investment Trusts and Investment Corporations
1st interim period(as of Apr. 30, 2019)50,000 thousand yen[Notes to the Interim Statement of Income]*1. Breakdown of operating income (loss) from real estate leasing(Unit: thousand yen)
1st interim period
From: Nov. 19, 2018To:
Apr. 30, 2019
A. Operating revenue from real estate leasing
Leasing business revenue
Rental revenue

277,014

Common area maintenance revenue

29,027

306,041

Other leasing business revenue
Utilities reimbursement
Parking revenue

14,203
5,764

Other rental revenue

2,455

Total operating revenue from real estate leasing

22,422
328,464

B. Operating expenses from real estate leasing
Expenses related to leasing businessOutsourcing expenses

22,177

Property management fee
Utilities expenses

4,894
18,386

Land rent
Repair expenses

394
117

Insurance premium
Trust fee

867
506

Depreciation
Other expenses related to leasing business

40,6642,238

Total operating expenses from real estate leasing

90,247

C. Operating income (loss) from real estate leasing [A−B]

238,217[Notes to the Interim Statement of Unitholders’ Equity]*1. Total number of investment units authorized and total number of investment units issued and outstanding
1st interim period
From: Nov. 19, 2018To:
Apr. 30, 2019
Total number of investment units authorized

10,000,000 units

Total number of investment units issued and outstanding-

90,247

12

239,600 units-

SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019
[Notes to the Interim Statement of Cash Flows]*1. Reconciliation of cash and cash equivalents at end of period to the amount of interim balance sheet items
1st interim period
From: Nov. 19, 2018To:
Apr. 30, 2019
Cash and deposits
Cash and deposits in trust

1,856,163 thousand yen
935,874 thousand yen

Cash and cash equivalents

2,792,038 thousand yen[Notes on Lease Transactions]Not applicable.
[Notes on Financial Instruments]
Matters concerning fair value, etc. of financial instruments
The following are the carrying amount and fair value as of April 30, 2019, and the amount of difference between these.
Carrying amount(thousand yen)
(1) Cash and deposits

1,856,163(2) Cash and deposits in trust
Total assets

Fair value(thousand yen)Amount of difference(thousand yen)

1,856,163-

935,874

935,874-

2,792,038

2,792,038-(1) Short-term borrowings

4,913,736

4,913,736-(2) Long-term borrowings

17,400,000

17,398,929(1,070)Total liabilities

22,313,736

22,312,665(1,070)(Note 1) Method of calculation of the fair value of financial instruments and matters concerning derivative transactions
Assets(1) Cash and deposits; (2) Cash and deposits in trust
Because these are settled in a short period of time, the fair value is approximately the same as the book value andthus stated at that book value.
Liabilities(1) Short-term borrowings
Because these are settled in a short period of time and have floating interest rates, the fair value is approximately thesame as the book value and thus stated at that book value.
(2) Long-term borrowings
Of long-term borrowings, because those with floating interest rates reflect market interest rates in a short period oftime, the fair value is thought to resemble the book value and thus stated at that book value. However, in the case oflong-term borrowings with fixed interest rates, the fair value is calculated based on the present value of their future
cash flows discounted over the time to maturity and at the rate adjusted for credit risks.
(Note 2) Financial instruments for which estimation of fair value is recognized to be extremely difficult
1st interim period(as of Apr. 30, 2019)
Leasehold and guarantee deposits received

88,992 thousand yen

Leasehold and guarantee deposits received in trust

1,917,422 thousand yen* “Leasehold and guarantee deposits received” and “Leasehold and guarantee deposits received in trust” are not subject to disclosure of fair value,
because there being no market price and, even if the lease contract period has been set, there being the possibility of contract cancellation
before expiration, contract extension or contract renewal make calculating the actual deposit period impossible and reasonable projection of
future cash flows is thus recognized to be extremely difficult.

-

13

-

SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019
[Notes on Securities]
Not applicable.
[Notes on Derivative Transactions]Not applicable.
[Notes on Share of Profit (Loss) of Entities Accounted for Using Equity Method]
Not applicable.
[Notes on Asset Retirement Obligations]Not applicable.
[Notes on Segment Information, Etc.]
1. Segment information
The information is omitted, because SANKEI REAL ESTATE has a single segment—the real estate leasing business.
2. Related information
1st interim period (from November 19, 2018 to April 30, 2019)(1) Information by product and service
The information is omitted, because operating revenue to external customers for a single group of products andservices exceeds 90% of operating revenue on the interim statement of income.
(2) Information by geographic area
i. Operating revenue
The information is omitted, because operating revenue to external customers in Japan exceeds 90% of operating
revenue on the interim statement of income.
ii.

Property, plant and equipment
The information is omitted, because the amount of property, plant and equipment located in Japan exceeds 90%of the amount of property, plant and equipment on the interim balance sheet.

(3) Information by major customer(Unit: thousand yen)
Name of customer

Operating revenue

GRANVISTA Hotels & Resorts Co., Ltd.

Related segment
56,745

Real estate leasing business

Bayer Yakuhin, Ltd.

Not disclosed (Note)

Real estate leasing business

NH Foods Ltd.

Not disclosed (Note)

Real estate leasing business(Note)

Not disclosed, due to unavoidable circumstances in that consent for disclosure has not been obtained from the lessee.

-

14

-

SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019
[Notes on Investment and Rental Properties]
SANKEI REAL ESTATE owns office buildings, etc. for the purpose of earning revenue from leasing. The carrying amount,amount of change during period and fair value of these investment and rental properties are as follows:(Unit: thousand yen)
1st interim period
From: Nov. 19, 2018To:
Apr. 30, 2019
Carrying amount
Balance at beginning of period-

Amount of change during period

44,017,620

Balance at end of period

44,017,620

Fair value at end of period

44,480,000(Note 1) Carrying amount is the amount of the cost of acquisition, less accumulated depreciation.
(Note 2) Of the amount of change during period, the amount of increase is mainly attributable to new property acquisition of 8 properties(44,058,285 thousand yen), while the amount of decrease is mainly attributable to depreciation (40,664 thousand yen).
(Note 3) Fair value at end of period is the appraisal value by an outside real estate appraiser. The date of value is October 31, 2018.

Furthermore, the income (loss) concerning investment and rental properties is presented in “Notes to the InterimStatement of Income.”[Notes on Per Unit Information]
1st interim period
From: Nov. 19, 2018To:
Apr. 30, 2019
Net assets per unit

96,175 yen

Earnings (loss) per unit

(1,104 yen)

(Note 1) Earnings (loss) per unit is calculated by dividing profit (loss) by the period’s daily weighted average number of investment units.
In addition, diluted earnings (loss) per unit is not stated, because there are no diluted investment units.
(Note 2) The basis for calculation of earnings (loss) per unit is as follows:

1st interim period
From: Nov. 19, 2018To:
Apr. 30, 2019
Profit (loss) (thousand yen)

(81,245)

Amount not available to common unitholders (thousand yen)-

Profit (loss) attributable to common investment units (thousand yen)

(81,245)

Average number of investment units during period (units)73,562[Notes on Significant Subsequent Events]
Not applicable.

-

15

-

SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019(8) Changes in Total Number of Investment Units Issued and Outstanding
Changes in unitholders’ capital and the total number of investment units issued and outstanding from the incorporation of
SANKEI REAL ESTATE to the last day of the interim period under review (April 30, 2019) are as follows:
Unitholders’ capital(thousand yen)
Date

Description
Increase(Decrease)

Balance

Total number of investment units
issued and outstanding(units)Remarks
Increase(Decrease)

BalanceNov. 19, 2018

Incorporation throughprivate placement

100,000

100,000

1,000

1,000

(Note 1)Mar. 11, 2019

Capital increase throughpublic offering

21,928,467

22,028,467

227,238

228,238(Note 2)

Apr. 10, 2019

Capital increase throughthird-party allotment

1,096,433

23,124,900

11,362

239,600(Note 3)(Note 1) Investment units were issued at a paid-in amount of 100,000 yen per unit upon the incorporation of SANKEI REAL ESTATE.
(Note 2) New investment units were issued through public offering at an issue price of 100,000 yen (paid-in amount of 96,500 yen) per unit.
(Note 3) New investment units were issued through third-party allotment at a paid-in amount of 96,500 yen per unit.

-

16

-

SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019

4. Changes in Directors(1) Directors of the Investment Corporation
There were no changes in directors in the interim period under review.
(2) Directors of the Asset Management Company
There were no changes in directors in the interim period under review.

-

17

-

SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019

5. Reference Information(1) Investment Status
1st interim period(as of Apr. 30, 2019)
Asset group

Geographic area
(Note 1)

Asset type

Total amount held(million yen)
(Note 2)

As a percentage of
total assets(%) (Note 3)

2,572

5.4

ordinance (excluding above), core cities
and major regional cities--

Greater Tokyo, Osaka City and Nagoya City--

Cities designated by government
ordinance (excluding above), core cities--

32,384

67.9

-

-

9,060

19.0

-

-

9,060

19.0

-

-

Greater Tokyo, Osaka City and Nagoya City
Cities designated by government

Office buildings
Real estate
Sub assets

and major regional cities
Greater Tokyo, Osaka City and Nagoya City
Cities designated by government

Office buildings

ordinance (excluding above), core cities
and major regional cities
Greater Tokyo, Osaka City and Nagoya City

Real estatein trust

Cities designated by government
ordinance (excluding above), core cities

Sub assets

and major regional cities
Greater Tokyo, Osaka City and Nagoya City
Cities designated by government

Hotelsordinance (excluding above), core cities
and major regional cities
Subtotal

44,01792.3

Deposits and other assets

3,647

7.7

Total assets

47,665100.0(Note 1) “Greater Tokyo” refers to Tokyo, Kanagawa Prefecture, Saitama Prefecture and Chiba Prefecture.
“Core cities” refers to cities with population of 200,000 or more (excluding Greater Tokyo, Osaka City and Nagoya City, and other cities
designated by government ordinance).
“Major regional cities” refers to cities that are municipalities with population of less than 200,000 and the Asset Management Company has
deemed certain demand can be found for specific asset types.
(Note 2) “Total amount held” is based on the interim balance sheet (in the case of real estate and real estate in trust, the depreciated book value) asof April 30, 2019, rounded down to the nearest million yen. Furthermore, the total amount held for real estate in trust with hotel as the asset
type includes the book value of movables incidental to hotels.
(Note 3) “As a percentage of total assets” is rounded to one decimal place.

1st interim period(as of Apr. 30, 2019)
Amount(million yen)
(Note 1)

As a percentage of
total assets(%) (Note 2)

Total liabilities

24,621

51.7

Total net assets

23,043

48.3

Total assets

47,665100.0(Note 1) The total liabilities, total net assets and total assets amounts are each based on the carrying amount as of April 30, 2019, rounded down to
the nearest million yen.
(Note 2) “As a percentage of total assets” is rounded to one decimal place.

-

18

-

SANKEI REAL ESTATE Inc. (2972) Interim Financial Report for the Fiscal Period Ending August 2019(2) Investment Assets
The assets held by SANKEI REAL ESTATE (real estate or trust beneficiary rights that have real estate as trust assets; hereinafter,

Asset type

Geographic area

may be collectively referred to as the “portfolio assets”) as of April 30, 2019 are as follows:

Property
numberA-1

Office buildings

A-3

A-4
A-5

Tokyo
Chiyoda-ku, Sept. 28,
Sankei Building
Tokyo
2000
(Note 10)Kita-ku,
BREEZÉ TOWER
July 1,
Osaka-shi,(Note 10)
2008
Osaka
S-GATE
Chuo-ku,
Oct. 31,NIHONBASHIHONCHO
Tokyo
2018
(Note 10)
S-GATEAKIHABARA
HibiyaChiyoda-ku, Sept. 29,
Tokyo

2017

Chiyoda-ku, June 25,

Total
Book
Appraisal Number
rental
value
value
of
Investrevenue
Pricement (million yen) (million yen) tenants (million yen)
(Note 3)(Note 4) (Note 5)(million yen) ratio(Note 6)(%)

Total
leasablearea(m2)(Note 7)

Total
leasedarea(m2)(Note 8)

Occupancy
rate(%)(Note 9)

2,509

5.8

2,572

2,540

45

96

881.16875.15

99.3

8,600

19.8

8,696

9,300

36

597

8,097.34

8,097.34

100.0

6,698

15.4

6,773

6,780

3

307

3,171.83

3,171.83

100.0

2,055

4.7

2,079

2,080

5

111

1,681.55

1,681.55

100.0

5,829

13.4

5,924

5,900

11

386

3,439.61

3,439.61

100.0

4,959

11.4

5,011

5,020

10

306

5,594.90

5,594.90

100.0

3,782

8.7

3,898

3,790

5

205

4,224.52

4,224.52

100.0

34,43479.4

34,95635,410115

2,008

27,090.91

27,084.90

100.0

8,961

20.6

9,060

9,070

1

413

6,006.53

6,006.53

100.0

Sankei Building

Tokyo

1992

Hatchobori

Chuo-ku,

Sept. 1,

Sankei Building

Tokyo

1965

Toyo

Koto-ku,

June 18,

Park Building

Tokyo

1991

-

-

Hotel Intergate

Chuo-ku,Jan. 18,

Tokyo Kyobashi

Tokyo

2018

Subtotal (Average)

-

-

8,961

20.6

9,060

9,070

1

413

6,006.53

6,006.53

100.0

Portfolio total (Average)--

43,395100.0

44,01744,480116

2,421

33,097.44

33,091.43

100.0

A-6
A-7

Subtotal (Average)

Sub assets

Greater Tokyo, Osaka City and Nagoya City

A-2

Property
nameConstruction
Location completion(Note 1)

Acquisition price(Note 2)

B-1

(Note 1) “Construction completion” is the date of new construction completion in the registry of the main building for each portfolio asset. If there are
multiple main buildings, the oldest building in the registry is indicated.
(Note 2) “Acquisition price” is the sale and purchase price of real estate and each trust beneficiary right stated in each sale and purchase agreement for the
portfolio assets, rounded down to the nearest million yen. The sale and purchase prices do not include consumption tax, local consumption tax andthe various expenses required for the acquisition. “Investment ratio” is the proportion of the acquisition price of each portfolio asset to the sum total
amount of acquisition prices, rounded to one decimal place.
(Note 3) “Book value” is the depreciated book value for each portfolio asset as of April 30, 2019, rounded down to the nearest million yen.
(Note 4) “Appraisal value” is the appraisal value as of October 31, 2018 stated in each real estate appraisal report. The appraisal of each portfolio asset is
entrusted to Japan Real Estate Institute, The Tanizawa Sōgō Appraisal Co., Ltd. and Daiwa Real Estate Appraisal Co., Ltd.
(Note 5) “Number of tenants” is the number of tenants based on the lease agreement for each portfolio asset as of April 30, 2019. However, the total numberof end tenants is indicated for the portion in the pass-through-type master lease agreement when a master lease agreement has been concluded forsaid asset.
(Note 6) “Total rental revenue” is the amount calculated by annualizing the monthly rent (Only for rent of rental rooms excluding usage fee of warehouse,signboard, parking lot, etc. and including common service expenses. Free rent and rent holiday will not be taken into consideration. Consumption tax,
etc. are not included.) of the building indicated in the lease agreement for each portfolio asset effective as of April 30, 2019, rounded down to thenearest million yen. Moreover, the amount calculated by annualizing the monthly rent in the lease agreement concluded with the end tenant for the
portion in the pass-through-type master lease agreement is indicated when a pass-through-type master lease agreement has been concluded for the
portfolio asset.
(Note 7) “Total leasable area” is the area believed to be leasable based on the lease agreement or drawing, etc. of buildings for each portfolio asset as of April
30, 2019.
(Note 8) “Total leased area” is the total leased area shown in the lease agreement for each portfolio asset as of April 30, 2019. Moreover, the total area forwhich a lease agreement has actually been concluded with the end tenant is indicated for the portion in the pass-through-type master leaseagreement.
(Note 9) “Occupancy rate” is the ratio of total leased area to total leasable area for each portfolio asset as of April 30, 2019, rounded to one decimal place. In
addition, each subtotal and portfolio total figure is the ratio of the sum total of total leased area to the sum total of total leasable area for eachportfolio asset, rounded to one decimal place.
(Note 10) The acquisition price, appraisal value, total rental revenue, total leasable area and total leased area for “Tokyo Sankei Building” and “S-GATENIHONBASHI-HONCHO” are the figures equivalent to the co-ownership interests in each property held by SANKEI REAL ESTATE (2% and 51%,
respectively) (*1). The acquisition price, appraisal value, total rental revenue, total leasable area and total leased area for “BREEZÉ TOWER” are thefigures equivalent to the quasi co-ownership interest in sectional ownership of the office portion, etc. held by SANKEI REAL ESTATE (30%) (*2).
(*1) As for “Tokyo Sankei Building,” SANKEI REAL ESTATE holds 2% co-ownership interest in the ownership of the site, 2% quasi co-ownership interestin the leasehold and 2% co-ownership interest in the ownership of the building. As for “S-GATE NIHONBASHI-HONCHO,” SANKEI REAL ESTATE
holds trust beneficiary rights with 51% co-ownership interest in the ownership of the site and building as trust assets.
(*2) As for “BREEZÉ TOWER,” SANKEI REAL ESTATE holds 30% quasi co-ownership interest in trust beneficiary rights with sectional ownership of theoffice portion and use rights of the site (ownership of the site, leasehold and mutual use rights) as trust assets.

-

19-